Last week was another one of those weeks when downward moves in the market brought back those lingering thoughts of Is this the start of 2008 all over again? I think the answer is no. One of the market analysts that I follow particularly closely (because he is right so much of the time) is Richard Bernstein – former Chief Investment Officer at Merrill Lynch and now CEO of his own firm. Below is a short article his firm released this morning.

We are always on the lookout for something that suggests we need to make meaningful changes in your portfolios. I don’t think we’ve seen that something yet.

If you have questions or would like to chat, please let me know.

How do we know whether or not it’s time to sell?

Last week’s drop in the S&P 500® marks the 27th 5%+ pullback of this bull market and the third of 2018. We do not take these market moves lightly, but it is also important to put them into context — both relative to history and relative to the fundamentals. 5%+ pullbacks have historically occurred three times per year going back to 1928. Of those, less than 20% turned into 15% corrections and roughly 10% turned into full-blown bear markets. Given the frequency of short-term pullbacks, we rely heavily on the fundamentals to help us determine whether or not to sell.

We believe that in order for this pullback to turn into a bear market, we would need to see signs of a profits recession, significant tightening up of liquidity and/or unrealistically bullish investor expectations. We see none of these signals today. While overseas profit fundamentals have slowed, we think investors may still be underestimating the nominal profit growth potential here in the US. Meanwhile, liquidity remains ample and the fears of a 2008 repeat remain.